John, a farmer in Maryland, is preparing a farming business plan for next spring. He owns 5,000 acres and plants three crops on the farm: corn, beans, and rice. This com- ing spring, he decides to plant one more crop on his farm: wheat. Assume the follow- ing parameters apply to this exercise:
|
|
Corn
|
Beans
|
Rice
|
Wheat
|
Endowment
|
|
Profit ($/bushel)
|
$4.50
|
$3.50
|
$2.50
|
$3.00
|
|
|
Risk ($/acre)
|
$200.00
|
$100.00
|
$50.00
|
$80.00
|
|
|
Yield (bushels/acre)
|
100
|
50
|
60
|
85
|
|
|
Labor (hour/acre)
|
25
|
20
|
10
|
15
|
80,000
|
|
Land (per acre)
|
1
|
1
|
1
|
1
|
5,000
|
Although John wants to diversify his farm products, he is reluctant to change the cur- rent planting pattern of 1,500 acres of corn, 500 acres of beans, and 2,000 acres of rice, because changes in planting will cause an unknown risk and cost. Use GP to determine what John should do for next spring. He would like to make at least $1.07 million in profit and not bear more than $0.45 million in risk.